Was Pierce way off the mark?
John R. Pierce led the Bell Labs research team that created the first transistor and gave it its name.  He was later the Chief Engineer at the Jet Propulsion Laboratory at CalTech.

His relationship to artificial intelligence research was mainly in regard to language translation.  He wrote the following.1


  The computer has opened up to linguists a host of challenges, partial insights, and potentialities. ... Certainly, language is second to no phenomenon in importance. ... The new linguistics presents an attractive as well as an extremely important challenge. ... The most reasonable government source of support for research in computational linguistics is the National Science Foundation. ... We estimate that work on a reasonably large scale ... would be justified at ... an annual expenditure of \$2.5 to \$3 million.


No official record of Pierce stating unequivocally that all artificial intelligence funding is stupid can be found.  Nils J. Nilsson's The Quest for Artificial Intelligence quotes Donald Knuth stating this.


  John R. Pierce, whom I have already mentioned in connection with the ALPAC report on machine translation (in section 7.2) and his negative comments about speech understanding (p 222) wrote me a very short letter
  in which he stated,
  
  
    Concerning artificial intelligence, I believe I invented the slogan, "Artificial intelligence is real stupidity."
    
    ...
    
    I resent artificial intelligence because I feel that it is unfair to computers. But then, artificial intelligence people did devise LISP, which is pretty good.
  
  
  The letter did not elaborate on the slogan or why AI is "unfair to computers."


The paragraphs that may have drawn the most negative attention (and possibly fabricated quips) are these.2


  It would be too simple to say that work in speech recognition is carried out simply because one can get money for it.  That is a necessary but not a sufficient condition.  We are safe in asserting that speech recognition is attractive to money.  The attraction is perhaps similar to the attraction of schemes for turning water into gasoline, extracting gold from the sea, curing cancer, or going to the moon.  One doesn't attract thoughtlessly given dollars by means of schemes for cutting the cost of soap by 10%.  To sell suckers, one uses deceit and offers glamor.
  
  It is clear that glamor and any deceit in the field of speech recognition blind the takers of funds as much as they blind the givers of funds.  Thus, we may pity workers whom we cannot respect.  People who work in the field are full of innocent (in their own view) enthusiasm.


In hindsight, we can see a few things Pierce called correctly.


Technology projections that are not based on realistic assessments of progress that has already been made and verified in the correspondence between theory, experimental results, and penetration into a market that exercises the technology in the real world can be unreliable in terms of both feasibility and cost in time and money.
Natural language translation and comprehension are important areas of research but research results from short term investments will not be substantial.  The problem complexity is high.


Whether Pierce meant that artificial intelligence is real stupidity literally or whether he was referring to the unrealistic expectations planted by researchers at MIT to obtain defense funding after the launch of Sputnik, we may never know for sure, but is easy to guess.

The comment about LISP is an obvious reference to Marvin Minsky's lab, which allegedly did not produce for the U.S. government what was promised.  It is merely an allegation because research failures can be fabrication to assist in classifying publicly funded research.

I say this as one who spent time with those in the closely linked AI lab at the United Technologies Research Center.  Everyone had national security clearances, and we all saw fabricated successes and fabricated failures.  There is good reason for mixing in misinformation when espionage is a known phenomenon.

Based on the way Pierce commonly wrote, the unfairness to computers was likely a satirical comment about research funding pitches and the unrealistic expectation they placed on the speed of computer technology development.  He is certainly not a person that would anthropomorphize a computer witlessly.

Pierce was given the leading role at the JPL because he gained credibility among fiscal stakeholders by telling the truth while at Bell Labs.  Some of the futurists in leading technology roles today might benefit from that history.

References

[1] Language and Machines, Pierce, 1966, ALPAC report to the U.S. National Science Foundation

[2] Whither Speech Recognition?, Pierce, 1969, Journal of the Acoustical Society of America, Vol. 46, No. 4